The Consensus Is Complacent

This commentary originally appeared at 7:31 a.m. EST on Jan. 9 on Real Money Pro -- for access to all of legendary hedge fund manager Doug Kass's strategies and commentaries, click here.

My general impression is that the consensus of both the technical crowd and the fundamental crowd is upbeat after the first week of trading in 2013.

It is encouraging to technicians that the indices have held onto most of the gains following the fiscal cliff fiasco -- and there is the lame and random January indicator, which I personally give almost zero predictive ability.

Fundamentalists see an upbeat backdrop as they cite improving economic momentum in the U.S., Europe and China. They throw out the first quarter of 2013 and talk about "cliff fatigue." Some even say it's OK if we end up without an agreement on spending and entitlement cuts. The bulls just want the government out of the way -- and it will be business as usual.

From my perch, I disagree with both.

The price charts are a picture of what has happened in the past and don't indicate with precision what will happen in the future.

Fundamentally, too, as I described in my "15 Surprises for 2013," there is less than meets the eye to the generally upbeat impression that momentum is gaining. I think it odd that few are incorporating the impact of the Jan. 1 tax hikes on personal consumption. And I believe the multiplier applied to those tax-rate hikes is being underestimated.

Importantly, I don't think the bullish fundamentalists recognize the dependency and lack of sustainability in fiscal and monetary policy or that our budget is out of control and zero interest rates should not be considered a permanent condition.

Important, to me, is that the outlook for corporate profits is weakening.